Editor-in-chief: Prof. Johannes Platje

Editor: Prof. Johannes Platje

Vol. 4, No. 4, 9-45, December 2020

Linking the EU ETS with California’s Cap-and-Trade Program. A law and economics assessment

Authors: Manolis KOTZAMPASAKIS
Independent legal researcher, Greece
Edwin WOERDMAN
University of Groningen, The Netherlands

Aim: This paper aims to evaluate the legal barriers and policy obstacles to linking the European Union Emissions Trading System (EU ETS) with California’s Cap-and-Trade Program in the United States, and to identify potential legal solutions to overcome them, by taking a law and economics perspective.

Design / research methods: A qualitative law and economics analysis is performed by combining the legal-dogmatic method with insights from economic theory. Primary sources are the respective legal frameworks, ETS regulations, past linking agreements and relevant case law. Secondary sources include the relevant legal and economic literature, as well as policy documents, reports and press releases.

Conclusions / findings: An EU-California linkage of emissions trading systems (ETSs) is legally feasible on the basis of an informal agreement, through reciprocal amendments to the respective ETS-regulations. Potential barriers could emerge, in particular from misaligned provisions regarding price containment measures and offsets. A gradual implementation of certain mutually beneficial ETS reforms, possibly in conjunction with initially restricted linkage, can provide momentum for transcending these barriers.

Originality / value of the article: To date, no linking has taken place between emissions trading systems from different continents. This paper contributes to the legal-economic literature on linking the EU ETS with California’s Cap-and-Trade Program by performing an up-to-date analysis of its associated barriers and by providing concrete legal suggestions to possibly overcome them. Such a transatlantic linkage could enhance the cost-effectiveness of climate policy and contribute to the bottom-up expansion of carbon markets worldwide.

Keywords: EU ETS, California’s Cap-and-Trade Program, Linking, Emissions Trading, Climate Change, Law and Economics.

JEL: K32, Q54, Q48

doi: http://dx.doi.org/10.29015/cerem.898

Vol. 4, No. 4, 47-68, December 2020

The limits of economic theories and models

Author: Hans VISSER
Vrije Universiteit Amsterdam, Nederland

Aim: This article was written out of a felt need to reflect on the relationship between economic theories and models on the one hand and the empirical world as we experience it on the other. The question is in particular whether it is possible for economic models and theories to say anything definitive about the world we live in.

Design/Research methods: The article relies on professional publications, both within the field of economics and outside of it.

Conclusions/findings: There is much reason for humility, economic models and theories have hardly anything definitive to say about the empirical world, and there is a need for a more varied menu of theories and models and for a listening ear for the needs and fears of the population at large. The best we can do is discussing competing and conflicting views in a polite way. However, this requires a Sprachethik that looks more and more like an endangered species.

Originality/value of the article: Recent developments concerning the reach of economic models and theories are related to earlier discussions and a way forward is sketched.

Keywords: Economic methodology, The role of economists, Teaching of economics, Paradigms / Worldviews

JEL: A11, A20, B41

doi: http://dx.doi.org/10.29015/cerem.887

Vol. 4, No. 4, 69-95, December 2020

The effect of product diversification on Corporate Social Performance in the non-renewable energy industry. Exploring the moderating effects of host country development and the Sustainable Development Goals

Authors: Renske JONGSMA, Bart Jan Willem (Bartjan) PENNINK
University of Groningen, the Netherlands

Aim: Building upon stakeholder and institutional theory, this paper investigates the relationship between product diversification and corporate social performance (CSP), thereby attempting to make essential contributions to the current literature. Based on an extensive literature review, it was expected that related, unrelated and total product diversification are positively related to CSP. Moreover, it was hypothesized that the exposure to weak institutional host country environments negatively affects the relationship between diversification and CSP, and that the Sustainable Development Goals (SDGs) have a positive effect on the relationship.

Design / Research methods: The sample selected for this research is the non-renewable energy industry, since the industry shows great divergence in terms of corporate social responsibility (CSR) performance. In addition, the industry is highly susceptible to regulatory changes, while the Sustainable Development Goals have an enormous focus on the reliability and sustainability of energy, making it a highly relevant industry to study. This study analyzed 40 a 40 non-renewable energy firms over a time frame of seven years, by using OLS regression.
Conclusions / findings: The results reveal that unrelated diversification is positively related to CSP, while the other forms of diversification show insignificant results. Contrary to expectations, the Sustainable Development Goals negatively affect the relationship between product diversification and CSP, while the moderating effect of exposure to weak institutional environments is insignificant.

Originality / value of the article: Research on the relationship between product diversification on corporate financial performance is well-established, but the way in which product diversification influences a firm’s behavior towards stakeholder demands and social concerns remains largely unexplored. Accordingly, the results of this study challenge existing theories while adding more context to the existing relationship, and in turn provide promising avenues for future research.

Keywords: stakeholder theory, institutional theory, product diversification, corporate social performance, sustainable development goals, non-renewable energy industry.

JEL: L20, L25, Q40, Q41, Q42

doi: http://dx.doi.org/10.29015/cerem.893

Vol. 4, No. 4, 95-113, December 2020

Optimism in a time of uncertainty. Spinoza, Kant and the eternal peace

Author: Ingrid ROOS
University of applied Science Inholland, Diemen, the Netherlands

Aim: This article describes ideas of Enlightenment thinkers about the building of a democratic state with responsible and rationally thinking citizens. The article starts with the ideas of Spinoza, formulated in the seventeenth century, and will end in our time, where democracy is under threat.

Design/Research method: The article relies on professional publications, both within the fields of philosophy and political sociology.

Conclusions/findings: The study concludes that the optimistic expectations about the increase of democracy and the stability of democratic institutions in the world are no longer valid.

Originality/Value of the article: Recent developments in the political field in the western world make this optimism questionable.

Keywords: Philosophy, political sociology, democracy

JEL: Z18

doi: http://dx.doi.org/10.29015/cerem.892

Vol. 4, No. 4, 115-132, December 2020

COVID-19 and consumer financial vulnerability

Author: Johan van OPHEM
Wageningen University & Research, The Netherlands

Aim: This paper provides an overview of the impact of COVID-19 on consumer (household) financial vulnerability in the Netherlands in the context of socio-economic developments for households in the period 2008-2016.

Design/ research methods: After a discussion of the socio-economic developments for household in the period 2008-2016, financial vulnerability analytics is used to discuss the implications of the published results of two surveys on the impact of COVID-19 on the financial situation of households in the Netherlands (AFM/CPB, NIBUD).

Findings: It appears that problems are to be expected in households with uncertain incomes (e.g., flex workers and self-employed), in households with inflexible budgets (with fixed and necessary expenses higher than disposable income), in households that are fragile because of lack of buffers, and in households with a low income for a longer period of time. Some households such as the ones of singles and the young are less able to cope with the financial risks than others. There are lifecycle effects to be noted: the young will have difficulty in finding and keeping jobs, and therefore in making ends meet.

Value of research: The analytics and results are of interest and relevant for cross-cultural research in other Western Countries.

Keywords: Corona, COVID-19, financial vulnerability, income decline; unemployment

JEL: D11, D14

doi: http://dx.doi.org/10.29015/cerem.894

Vol. 4, No. 4, 133-158, December 2020

Towards sustainable innovations – essay in memoriam of Andries Nentjes

Author: Yoram KROZER
Sustainable Innovations Academy, Amsterdam, Netherlands, Graz University of Technology, Austria

Aim: This paper assesses theoretically and empirically three key factors for sustainable development within context of debates about economy and environment: autonomous technological change, induced technological change and barriers of entry to innovations.

Design/research methods: The paper covers a literature review on strong versus weak sustainability, followed by an explanation of autonomous technological change. Statistical analysis with literature review on induced technological change due to consumers’ and policy demands for sustainable innovations, as well as literature review on policy support for the incumbent interests that rival sustainable innovations is provided. The information used is largely based on two chapters in the book on sustainable innovations (Krozer 2015), and presented in the context of long scientific cooperation with the late Andries Nentjes.

Conclusion/findings: The economic theoretical debates are hardly relevant for policies on sustainable innovations, because political views are inconsistent with observations and change during fluctuations in economic outcomes. The main conclusion is that autonomous technological change is the driver of sustainable innovations. Present policies pose barriers of entry to sustainable innovations, where the global value of support for vested interest exceeds the market potential for induced technological change due to demands of policies and consumers put together.

Originality/value of the paper: The study contribution to understanding of autonomous and induced technological change, showing that shifting policy support away from the incumbent interests towards sustainable innovations is key for sustainable development.

Keywords: sustainable innovations, income, environment, consumers, business support.

JEL: O00, O30, O31, O32, O55, Q01

doi: http://dx.doi.org/10.29015/cerem.903